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Income Tax Sec 80GG for Old Tax Regime FY 2023-24

April 15, 2023
3:51 am

Section 80GG in the Income Tax Law provides deductions for rental expenses based on certain criteria. These criteria include being an individual or a Hindu Undivided Family (HUF), being self-employed or salaried, and other conditions. One of the key deductions available is for rent paid on a house, which is covered under this section. This can be particularly beneficial for employees who do not receive a rental housing allowance (HRA) from their employers.

Deductions under Section 80GG

To qualify for deductions related to rental expenses under Section 80GG, you must meet the following conditions:

Must be an individual or a United Hindu Family (HUF). This means that businesses are not eligible to claim rental deductions.
It is necessary to be self-employed or salaried. If you are neither, you cannot claim rental deductions under this section.
You should not receive HRA benefits on your wages. If you do receive HRA benefits, you cannot claim deductions under Section 80GG.
You must complete and submit Form 10BA, which declares that you are not claiming the Self-Occupied Property benefit in a home elsewhere or in the same location where you are employed.
If your annual rent payment exceeds Rs. 1 lakh, you must provide the PAN card of the owner of the house where you reside for rent.
You can claim rental deductions even if the house you are renting is semi-furnished or fully furnished.

Under Section 80GG, you can claim deductions for rental expenses based on the lesser of the following amounts:

Rs. 60,000 annually (or Rs. 5,000 per month)
The amount equal to the total rent paid minus 10% of your total income
25% of your annual salary

You can choose the lowest amount from the above options to claim as a deduction for rental expenses under Section 80GG.

Exceptions under Section 80GG

There are certain circumstances in which you cannot claim a deduction for rental expenses under Section 80GG. These include:

If you own a home where you are employed or run a business, you cannot claim a deduction for rental expenses.
If you are already claiming benefits for owning a home elsewhere as self-occupied property, you cannot claim a deduction for rental expenses.
If you live in one city but own a house in another city/town, it will be considered rented and you may be eligible to claim a deduction for rental expenses under Section 80GG.

If you are living with your parents, there is a way to take advantage of the benefits provided by Section 80GG. You can enter into a rental agreement with your parents and pay them a specified amount, which must be at least Rs. 60,000 as rent. However, your parents will have to declare that amount as income on their tax return.

In today’s real estate market, it is highly unlikely that the rent amount would be anything other than the Rs. 60,000 limit allowed under Section 80GG. If you are paying rent less than Rs. 5,000 per month, it is likely that you are living in a smaller city with a lower income, which means you may be completely exempt from paying income tax.

By entering into a rental agreement with your parents, you can benefit from the deductions available under Section 80GG while also providing your parents with additional income.

How to correctly fill out Form 10BA

To claim the benefits provided by Section 80GG, you will need to complete Form 10BA. The instructions for filling out this form are as follows:

Provide your name and PAN details.
Pay mode
Enter your full address.
Indicate the duration of your residence in months.
Provide the rent amount and the address of the property owner.
Declare that neither you nor any member of your family owns any other residential property.
Provide data from the PAN of the owner of the rented property.

By filling out Form 10BA correctly, you can claim deductions for rental expenses under Section 80GG.

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